Mulally Culture at Ford

A hat tip to our friend Karen at Lean Reflections for pointing us to this article on how Ford CEO Alan Mulally is trying to change the company's entrenched culture... before it's too late. Since Ford's fortunes have a direct impact on her personal fortunes, Karen writes from personal standpoint. She concludes with some interesting commentary on the inside nicknames for several Ford buildings. But back to the article on Mulally.

Although Mulally lacks in-depth auto industry knowledge, he is also free of many of the intellectual biases and habits that have gotten Detroit into so much trouble. But Mulally knows that changing the organizational chart won't cure Ford. The company's deeply ingrained hierarchical culture needs to be blown up. He wants managers to think more about customers than their own careers. He has made it a top priority to encourage his team to admit mistakes, to share more information, and to cooperate across divisions. He's holding everybody's feet to the fire with tough operational oversight and harsh warnings about Ford's predicament.

Mulally is taking advantage of his outsider status to question some deep aspects of Ford's culture, starting with his executive staff.

At a meeting last fall, one of Mulally's operating chiefs chattered on for several minutes trying to answer a question to which he clearly did not have the answer. After the meeting, Mulally asked Fields why the executive droned on for so long. "Because 'I don't know' isn't in Ford's vocabulary," Fields explained. Now it is. To reinforce the point, Mulally has actually banned the thick background binders executives used to bring to the weekly meetings. That means they sometimes can't immediately summon the necessary details to answer Mulally's questions.

And then communication between groups.

For the first time ever he's forcing every operating group to share all its financial data with every other group. That information used to be closely guarded. Shortly after he ordered the change, three separate executives called him to make sure they had heard right. Says Mulally: "You can't manage a secret."

And demonstrating to his engineers how to listen to the customer.

On a chilly morning in February, the new chief executive of Ford Motor Co., Alan R. Mulally, boarded one of the company's Falcon twin-turbo jets and flew to Consumer Reports magazine's automobile testing facility in East Haddam, Conn. He was joined by two senior engineers. After a couple of hours on the firing line, Ford's engineers got defensive. Mulally says he handed each one a pad and pen. "You know what? Let's just listen and take notes," he said. The episode was a perfect illustration of what Mulally considers one of Ford's major problems: the tendency of employees to rationalize mistakes instead of fixing them. "We seek to be understood more than we seek to understand," he observes.

And treating the rank and file just like the executives... or vice versa.

He is also taking symbolic steps to treat white-collar and blue-collar employees more equitably. This year many workers on the shop floor will receive bonuses of $300 to $800, based on a new formula that is also being applied to executives.

Instead of complaining about wage costs and foreign competition, he's looking an the internal waste of overly complex processes and designs.

It has four parallel operating units worldwide, each with its own costly bureaucracy, factories, and product development staff. According to a Mulally audit designed to uncover cost-cutting opportunities, no two vehicles in Ford's lineup share the same mirrors, headlamps, or even such mundane pieces as the springs and hinges for the hood. And that's just taking into account the Ford brand. Add Volvo, Jaguar, and Land Rover to the mix, and the company has more than 30 engineering platforms worldwide.

Whether all this will save Ford remains to be seen. Negotiations with the union later this summer will provide a big telling point. But we have to give Mulally credit for understanding that Ford's culture needs to be changed, and culture is driven by example from the top.

Mulally is to be commended for his tough stance. One other important point is the Engineering group understanding and practice of the concept of functional build. This key concept can help explain why, for example most Japanese-engineerd vehicles remain relatively trouble-free as compared to the US / domestic counterparts.
With functional build you don’t have to pursue a ‘perfect’ component part along with the misconception the sum of ‘perfect’ parts is equal to a perfect assembly. This single concept alone – if put into proper practice at Ford and other automakers – would have them turning out superior vehlcles in no time.

Mak khojasteh3 January 2012 - 7:41 am

As a Business professor I admire his courage in changing Ford’s culture. He is on the right track and I hope that Mr. Clay Ford stays away from making major decisions.